Corporate Governance, Accounting Conservatism And The Cost Of Equity Capital

China’s listed companies generally prefer equity financing,the cost of equity capital is a price pay for equity financing, to explore what factors affect the cost of equity capital has important significance for corporate financing.This paper investigates that as a system arrangement to solute the agent conflict of the enterprises,whether corporate governance effectively reduces the cost of equity capital and how accounting conservatism affects the relationship between corporate governance and accounting conservatism.So,this paper takes 2008-2014 Shanghai and Shenzhen A shares of listed corporations as the empirical study samples,constructing corporate governance composite index to measure the level of corporate governance and using GLS three-stage residual income to compute the cost of equity capital, in the base of using EXCEL2015 and SPSS19.0 tools and through a combination of normative and empirical research methods, this paper gets the following conclusions:(1)The level of corporate governance is higher, the cost of equity capital is lower.Whether the OLS regression between corporate governance and the cost of equity capital,or to join the accounting conservatism factors, corporate governance and the cost of equity capitalare significant negative correlation, it indicates that the higher the level of corporate governance,the more the cost of equity capital is reduced.(2)Accounting conservatism weakens the role of corporate governance in reducing the cost of equity capital.To examine the regulatory role of accounting conservatism,this paper joins accounting conservatism and the cross term of corporate governance and accounting conservatism on the regression model of corporate governance and the cost of equity capital, the regression results show that the coefficient of cross term is significantly positive,indicating accounting conservatism weakens the relationship between corporate governance and the cost of equity capital.This paper connects corporate governance with accounting conservatism to investigate the influence on the cost of equity capital.The results show that accounting conservatism weakens the role of corporate governance in reducing the cost of equity capital, which is the innovation of this paper content.Corporate governance is the decision-making mechanism of accounting information.Perfect corporate governance structure can produce high quality accounting information, relieve the internal and external information asymmetry of the enterprises, enhance the confidence of the investors, improve the liquidity of the stock and reduce the required rate of return of the investor.Conservatism is the recognition principle of accountinginformation,it regulates the formation process of the financial statements,delays the recognition of revenue and promptly confirms the loss,reduces the risk of investors, so the cost of equity capital is also reduced.Conservatism is holding asymmetric principle to good news and bad news,in the enterprise of good corporate governance, the conservatism systematically underestimates the net assets and earnings of enterprise, if investors can not effectively identify the conservatism deviation,that they may make wrong investment decisions according to the underestimation of the accounting information.